Cable Operators

Tempest in a Tablet

4/04/2011 12:01 AM Eastern

Cable’s efforts to deliver TV programming
to customers across a constellation
of devices is hitting a speed bump on
Apple’s iPad.

At the center of the dispute lies a core
question: On what devices are you allowed
to
watch TV?

Cover_Story_Image_04/04How that’s answered will have a bearing on the way home
viewers access video on a proliferation of Internet-enabled
devices — not just iPads, but also connected TVs and other
gizmos. And it weighs heavy on cable networks, which depend
on cable operators for more than $30 billion in affiliate
fees annually.

The disagreements over whether existing TV rights apply to
new kinds of devices, or whether they merit discrete ancillary
agreements, are complicating the cable industry’s already complex
effort to deliver and measure multiplatform TV through TV
Everywhere initiatives.

Last week, Time Warner Cable backed down in the face of
legal threats from several programmers, pulling live feeds of a
dozen networks from Discovery Communications, Fox Cable
Networks and Viacom from its TWCable TV iPad app.

SURPRISED BY BACKLASH

The backlash came as a shock to the nation’s No. 2 cable operator,
which had been expecting networks to be happy that its subscribers
could now watch their favorite shows on a cool, shiny
new device.

The iPad, with a 9.7-inch touchscreen, has bloomed into an
overnight sensation, with more than 15 million shipped in
the first nine months of availability. Time Warner Cable, seeing
would-be competitors like Netflix flinging video to iPads,
quickly created its own tablet app.

The operator proudly launched the app on March 15, letting
subscribers watch TV on an iPad over their home Wi-Fi networks
for no extra charge. The surge in initial demand temporarily
crashed its authentication system, and TWC said the app
has been downloaded by more than 300,000 customers.

But some programmers cried foul — both Fox Cable and Viacom
sent cease-and-desist notices to Time Warner Cable — asserting
the iPad app wasn’t authorized. While still defiant, TWC
removed Discovery’s Animal Planet, Discovery and TLC; Fox’s
FX and National Geographic Channel; and Viacom’s BET, CMT,
Comedy Central, MTV, Nick, Spike and VH1.

The drama wasn’t over yet. The following day (April 1), the
operator announced that — overnight — it had added 17 new
channels from programmers including Disney/ESPN, Comcast
Networks and Rainbow Media to the TWCable TV app for the
iPad.

“We are proud to be working with the programming partners
who understand the importance of meeting our customers’,
and their viewers’, desire to watch the content they pay for
on any screen in their home,” TWC president and chief operating
officer Rob Marcus said in announcing the additional channels,
which brought the number of national networks available
via the app to 37.

Meanwhile, at press time, Cablevision was ready to launch
an iPad app that will let subscribers access their full TV lineups
and video-on-demand content at home, pending Apple’s
approval. The Bethpage, N.Y.-based operator insisted the delay
with the debut of the Optimum App for iPad had nothing to do
with objections programmers have raised about Time Warner
Cable’s app.

The app “works wonderfully,” Cablevision spokesman Jim
Maiella said last Thursday. “The application has been submitted
to Apple and, upon its approval, will be available to our cable-
television customers.”

Time Warner Cable and Cablevision executives have asserted
that their streaming-video iPad applications are covered under
existing TV carriage deals because the apps limit viewing
to a subscriber’s home, delivered securely over their own private
networks.

TWC: WITHIN OUR RIGHTS

Time Warner Cable chief programming officer Melinda Witmer
said the operator licenses the right to deliver “programming signals
to customers in their homes, and we have never designated
what screen the customer has the rights to access it on.”

Objecting to TWC’s iPad app, Witmer said, “is akin to telling
a customer they need to have a Sony Bravia and to designate
the screen size, which seems to be a really anti-consumer
proposition.”

Time Warner Cable distinguishes between access inside the
home and outside the home. Separate from the TWCable TV
app, the cable operator is pursuing “TV Everywhere” deals
to let subscribers watch video content when they’re in other
locations, Witmer said. For example, under a broader deal
hashed out with Disney/ABC Television last fall, Time Warner
Cable customers already can watch live simulcasts of
networks, including ESPN and ESPN2, over any Internet connection if they have a cable-TV subscription package that includes those
channels.

One of the key issues programmers are concerned about is that viewers using tablets
or other non-TV devices won’t be counted in Nielsen ratings.

Nielsen is working to incorporate viewing of live TV on iPads — as well as Androidbased
tablets and other devices — but does not have an estimate about when such
metrics will be available, executive vice president of cross-platform audience measurement
Matt O’Grady said.

RATINGS ARE KEY

Measuring viewing on iPads is “a key priority for us. This came along, obviously, very
quickly,” O’Grady said. “We’re working with the operators to make sure we have the
appropriate measurement tool in place for every application.”

Witmer, for her part, said TWC will provide assistance in any way it can to help
viewership metrics be collected but noted that “it’s an issue between Nielsen, programmers
and consumer-electronics companies to collect that data.”

It’s worth noting that not all programmers are up in arms about the iPad apps.

Matt Murphy, senior vice president of digital video distribution for Disney and
ESPN Media Networks, said the live feed of ESPN’s flagship network is not available
via Time Warner Cable’s iPad app because the cable operator does not currently have
the ability to comply with blackout restrictions required under national TV contracts.

“We are not on the Time Warner Cable iPad app because their transport mechanisms
don’t support blackouts,” said Murphy, speaking on a panel at Multichannel
News
and Broadcasting & Cable’s “Video Everywhere: Who’s Cracking the Code?”
event last week. “We continue to be in conversations with them.”

Blackout restrictions are typically required under national TV contracts for sporting
events, to ensure local or regional broadcasters have exclusive rights to carry specific games.

Ultimately, the differences between pay TV providers and networks on this issue
can be reconciled, Turner Broadcasting System vice chairman Andy Heller said at
last week’s “Video Everywhere” confab.

“The fact that there is a disagreement is less important than the fact that [Time
Warner Cable] acknowledge[s] they need a rights grant to do it,” Heller said. That’s in
contrast with the approach taken by Dish Network with Slingbox — the satellite-TV
operator is letting subscribers remotely access programming through their set-top
boxes from anywhere, without any permission from the networks.

In another light, the spat over TV on the iPad is business as usual.

It has some of the hallmarks of the same hardball negotiating tactics that have long
characterized TV distribution deals.

TWC last week launched a publicity campaign that included a website,
IWantMyTWCableTVApp.com, to argue its case for why customers should be
allowed to watch live TV on the tablet devices under existing programming
distribution deals.

“You’ve already paid for these TV programs to be delivered to your home, and we believe you should be able to watch these programs
anywhere in your house, on any screen
you want,” the company said on the site.

What’s different is that the rapid pace at
which technology is developing — Netflix,
for example, is already streaming to 200-
plus devices — has created new opportunities
for operators and programmers to butt
heads. Their contracts may have been signed
years before Steve Jobs held up the first iPad
in mid-2010.

FORCING THE ISSUE

Now, with their iPad apps, Time Warner Cable
and Cablevision are forcing the issue.
Some programmers were perplexed with
what they viewed as a shoot-first-and-askquestions-
later approach.

For now, Time Warner Cable is sticking to
its guns, and industry observers predict the
standoff could lead to a formal lawsuit.

Another wrinkle: The Federal Communications
Commission could adopt a regulation
mandating that cable and satellite-TV
operators provide access to video programming
— via any compatible IP video device
that requests it. Pay TV operators, however,
have opposed the agency’s “AllVid” proposal,
which would supersede CableCard rules, arguing
it would impose exorbitant costs and
potentially violate existing programming
agreements.

Whatever happens, the issue will only become
more critical as Internet-connected
devices flood the market. Research firm
Gartner projects that more than 55 million
tablet devices will ship in 2011.

In the coming weeks, TWC expects to add
more channels for viewing through the iPad
app, including local-broadcast TV channels,
as well as make those available to other Internet-
connected devices, like Sony’s Bravia
and Samsung Electronics’ Smart TVs.

“This is the same technology that is going
to serve smart TVs,” Witmer said. “We anticipate
an environment where the way we get
to the smart TV in the living room is through
this IP-enabled environment. I can’t imagine
why anyone would want to say, ‘This is OK on
this TV, but not on that TV.’ ”

GETTING THE
RIGHTS RIGHT

Operators are bringing video
to the Web, smartphones
and other devices using
different rights models:

1 Explicit rights: A pay TV
operator obtains specific
permission for video
distribution beyond traditional
TV. Example: ESPN’s
model for distributing
simulcasts of its networks
to PCs and other devices;
to date, the sports programmer
has inked deals
with Time Warner Cable/
Bright House Networks
and Verizon’s FiOS TV.

2 Assumed rights: An
operator asserts that
existing carriage deals
allow subscribers to
access programming on
any screen in the home.
Example: Time Warner
Cable’s TWCable TV app
for the iPad, which allows
viewing only in a subscriber’s
home over Wi-Fi.

3 Personal usage rights:
Subscribers are assumed
to have legal ability to
access and record video
services using in-home
technology. Example: Dish
Network is using Slingbox
technology to deliver the
full TV lineup and DVR
recordings to a subscriber’s
own devices over the
Internet, on the premise
that it’s covered under
fair-use provisions.

September